FAIR VALUE MEASUREMENT

4 Months Ended

Dec. 31, 2012

FAIR VALUE MEASUREMENT [Abstract]

FAIR VALUE MEASUREMENT

(5) FAIR VALUE MEASUREMENT

The Company uses a fair-value approach to value certain assets and liabilities.  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The hierarchy consists of three levels:

· Level one - Quoted market prices in active markets for identical assets or liabilities;

· Level two - Inputs other than level one inputs that are either directly or indirectly observable; and

· Level three - Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment.  The Company evaluates its hierarchy disclosures each reporting period. Assets and liabilities measured at fair value on a recurring basis at December 31, 2012, August 31, 2012 and 2011 are summarized as follows:

Assets	Level 1		Level 2		Level 3		December 31, 2012
Cash equivalents	$	35,069	$	0	$	0	$	35,069
Short-term investments		22,096		0		0		22,096
Total	$	57,165	$	0	$	0	$	57,165
Liabilities
Common stock warrants	$	0	$	0	$	16,405	$	16,405
Total	$	0	$	0	$	16,405	$	16,405
Assets	Level 1		Level 2		Level 3		August 31, 2012
Cash equivalents	$	13,162	$	0	$	0	$	13,162
Short-term investments		15,307		0		0		15,307
Total	$	28,469	$	0	$	0	$	28,469
Liabilities
Common stock warrants	$	0	$	0	$	17,266	$	17,266
Total	$	0	$	0	$	17,266	$	17,266
Assets	Level 1		Level 2		Level 3		August 31, 2011
Cash equivalents	$	13,856	$	0	$	0	$	13,856
Short-term investments		0		0		0		0
Total	$	13,856	$	0	$	0	$	13,856
Liabilities
Common stock warrants	$	0	$	0	$	23,575	$	23,575
Total	$	0	$	0	$	23,575	$	23,575

Cash equivalents and short-term investments represent money market accounts and a short-term bond fund, respectively.  

Certain of the Company's common stock warrants are classified as liabilities and are, therefore, re-measured using the Black-Scholes option valuation model at the end of each reporting period with the change in value reported in the Company's consolidated statements of operations and comprehensive loss.

The following table presents a reconciliation of the activity for liability-classified common stock warrants, the Company's recurring fair value measurements categorized within level three of the fair value hierarchy:

Fair value as of September 1, 2010	$	15,780
Change in fair value recognized in earnings		16,301
Exercises		(8,506	)
Fair value as of August 31, 2011		23,575
Change in fair value recognized in earnings		3,173
Exercises		(9,482	)
Fair value as of August 31, 2012		17,266
Change in fair value recognized in earnings		1,484
Exercises		(2,345	)
Fair value as of December 31, 2012	$	16,405

The common stock warrants issued in the Company's August 2010 private placement and the Company's December 2009 equity financing are classified as liabilities under ASC 480 and are, therefore, re-measured using the Black-Scholes option valuation model at the end of every reporting period with the change in value reported in the Company's consolidated statements of operations and comprehensive loss. See Note 11 for further discussion of the fair value of the warrant liability.

As discussed above, the Company uses the Black-Scholes option pricing model as its method of valuation for warrants that are subject to warrant liability accounting. The determination of the fair value as of the reporting date is affected by Raptor's stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the security and risk-free interest rate.  The primary factors affecting the fair value of the warrant liability are the Company's stock price and volatility.

If the Company's December 31, 2012 closing stock price had been 10% lower, its net loss would have been approximately $2.0 million lower. If the Company's August 31, 2012 closing stock price had been 10% higher, its net loss would have been approximately $2.0 million higher

If the Company's December 31, 2012 volatility assumption had been 10% lower, the Company's net loss would have been approximately $0.7 million lower. If the Company's December 31, 2012 volatility assumption had been 10% higher, our net loss would have been approximately $0.7 million higher.